Constitution

BYLAWS OF

THE SURETY ASSOCIATION OF ARIZONA, INC.

An Arizona Nonprofit Corporation

Adopted May 6, 2005

ARTICLE 1. INTRODUCTION

Section 1.1 Adoption of Bylaws. These Bylaws were initially adopted by majority vote of the membership of The Surety Association of Arizona, Inc. (the “Association”) on May 6, 2005, and all former Bylaws were repealed.

Section 1.2 Purposes. The purposes of the Association are: (a) to improve the service rendered to the community by the people with the responsibility for the underwriting and placement of corporate suretyship; (b) to promote understanding among Association members through education, study and discussion of local surety problems and matters relating thereto; (c) to provide a central facility for correspondence with other organizations; (d) any other purposes stated in the Association’s Articles of Incorporation, as they now exist or are hereafter amended; and (e) to perform such other functions as may be incidental to the foregoing purposes.

Section 1.3 Compliance With Laws. It is the policy of the Association to comply with all laws, statutes, regulations and ordinances applicable to the Association, including but not limited to antitrust and other laws governing competitive practices. The Association and its Members shall refrain from exchanging any information which is treated as confidential by any Member or any Member’s employer, and from any activities, discussions, programs, or communications which may infringe any antitrust laws, including discussions of bond rates or pricing, rate setting, increases or decreases in rates, stabilization of rates, profit levels, discounts, credit terms, allocation of sales or markets, refusal to deal with entities due to rate-making practices, or other similar activities or topics affecting prices or competition.

ARTICLE 2. OFFICES

Section 2.1 Principal Office. The principal office of this Association will be its registered office described in Section 2.2.

Section 2.2 Location of Registered Office. The location of the present registered office of this Association is c/o Jay M. Mann, Mann, Berens & Wisner LLP, 2929 N. Central Avenue, Suite 1600, Phoenix, AZ 85012. Such registered office will be continuously maintained in Arizona for the duration of this Association, except that the Association may from time to time change the address of the registered office by duly adopted resolution and filing the appropriate statement with the Corporation Commission of the State of Arizona.

ARTICLE 3. NOT FOR PROFIT

Section 3.1 Nonprofit Operations. The Association is an Arizona nonprofit corporation. No dividend will be paid, and no part of the income or assets of this Association will be distributed, to its Directors, Officers, or Members. However, the Association may contract in due course of business with its Officers, Directors or Members for services rendered or products provided to the Association to the extent permissible under the Articles of Incorporation and under law.

Section 3.2 No Stock. The Association shall not issue shares of stock.

Section 3.3 No Loans to Directors, Officers, or Members. This Association will loan no money to any of its Directors, Officers, or Members.

Section 3.4 No Vested Rights. No Director, Officer, or Member of this Association has any vested right, interest, or privilege of, in, or to the rights, property, assets, functions, or affairs of the Association.

ARTICLE 4. MEMBERS

Section 4.1 Qualifications of Members and Surety Members. Any person nominated by an existing Member of the Association and approved for membership by the Executive Committee of the Association in accordance with Section 4.4 may be a Member. Any Member who is or has been employed by a corporate surety company or by the surety bond department of an insurance agency for a minimum of two (2) years shall be a Surety Member.

Section 4.2 Voting. Each Member shall be entitled to cast one (1) vote on any proposition or election which is submitted to the Members for voting. Voting may be permitted by voice vote at a meeting of Members, or by submission of votes following the meeting in writing, by e-mail or Internet response (“electronic voting”), or by facsimile, as may be directed by the Executive Committee. Voting on any matter which is submitted to the Members for voting may be conducted by electronic voting following the meeting at which the matter is submitted to the Members, and if voting is conducted by any method other than voice vote at a meeting, Members shall have ten (10) days in which to transmit their votes.

Section 4.3 Ownership and Assignability of Membership. A membership in the Association belongs to the individual person who has been nominated and approved for membership. Memberships are not transferable. The Executive Committee shall have discretion to appoint a replacement Member to hold the benefits of membership for the remaining membership period of a departing Member.

Section 4.4 Application for Membership. A person desiring membership in the Association shall submit an application on a form approved by the Executive Committee, and shall include the nominating endorsement of a current Member. The application shall be submitted to the Executive Committee, and the Executive Committee shall notify the Members of the pending application and shall request the Members to submit any comments regarding the application on a confidential basis within ten (10) days from the date of the notice. Thereafter, the Executive Committee shall have the sole discretion to approve or decline the application and grant or deny membership in the Association, and to determine whether the Member is a Surety Member; provided, however, that if a prospective member’s application is declined, the existing Member who nominated the prospective member shall have the right to submit the application for approval to the full membership of the Association at a regular meeting of the Association, for electronic voting or voting by any other method designated pursuant to Section 4.2 following the meeting at which the matter is submitted to the Members. If a majority of the Members vote to approve the application, then the declined applicant’s application for membership shall be granted. If a majority of Members do not vote to approve the application, then the declined applicant may reapply for membership after the expiration of at least one (1) year from the date of the Members’ vote.

Section 4.6 Annual Dues. Members shall pay annual dues in such amount as may be determined from time to time by the Executive Committee. The Executive Committee shall have the discretion to waive the payment of annual dues by individual Members in appropriate circumstances, as determined in the sole discretion of the Executive Committee.

Section 4.7 Removal. A Member may be removed at any time by the affirmative vote of at least three (3) of the Directors, whenever in their judgment the best interests of the Association will be served; provided, however, that the removed Member shall have the right to appeal the removal to the full membership of the Association at a regular meeting of the Association, and request that the removal be reversed. The appeal shall be submitted to the Members for electronic voting or voting by any other method designated pursuant to Section 4.2 following the meeting at which the matter is submitted to the Members. If a majority of the Members vote to reverse the removal, then the removed Member shall be reinstated to membership in the Association.

Section 4.8 Resignation. Resignation of a Member will become effective immediately or on the date specified therein.

Section 4.9 Place of Meetings of Members. Meetings of the Members will be held at such place or places within or without Arizona as the Executive Committee, or in the absence of the determination of the Executive Committee, the President, determines from time to time.

Section 4.10 Regular Meetings of Members. Regular meetings of the Members shall be held at such times and places as are specified by the Executive Committee or the President from time to time. Regular meetings are normally held on the third Tuesday of each month. Meetings may be suspended for the summer months as may be determined by the Executive Committee. Regular meetings may be held without notice of the date, time, place or purpose of the meeting.

Section 4.11 Annual Meetings of Members. An annual meeting of the Members shall be held at the November regular meeting, or such other time as the President determines. Written notice stating the date, time and place of each annual meeting will be delivered to each Member not less than ten (10) days before the date of the meeting, either personally or by first class mail, by Federal Express, by Express Mail, by e-mail, by facsimile or by telegram, by or at the direction of the President or the Secretary. If mailed, such notice will be deemed to be delivered when deposited in the United States mail addressed to the Member at his address as it appears on the records of this Association, with postage prepaid. Such notice need not state the business to be transacted at, nor the purpose of, such meeting.

Section 4.12 Call of Special Meetings of Members. A special meeting of the Members may be called by any one of the following: the President; the Executive Committee; or a majority of the Members.

Section 4.13 Notice of Special Meetings of Members. Written notice stating the date, time and place of any special meeting of the Members will be delivered to each Member not less than two (2) days before the date of the meeting, either personally or by first class mail, by Federal Express, by Express Mail, by e-mail, by facsimile or by telegram, by or at the direction of the President, or the Secretary, or the persons calling the meeting. If mailed, such notice will be deemed to be delivered when deposited in the United States mail addressed to the Member at his or her address as it appears on the records of this Association, with postage prepaid. Such notice need not state the business to be transacted at, nor the purpose of, such meeting unless otherwise required by the Articles of Incorporation or these Bylaws.

Section 4.14 Waiver of Notice of Meeting of Members. Notice of the date, time, place, and purposes of any meeting of Members may be waived in writing, either before or after the holding of such meeting, by any Member, which writing shall be filed with or entered upon the records of the meeting. The attendance of any Member at any such meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by him or her of notice of such meeting.

Section 4.15 Quorum of Members. A majority of the Members shall constitute a quorum. The vote of a majority of the Members at a meeting at which a quorum is present will be the act of the Members, unless a greater number is required by law, by the provisions of the Articles of Incorporation or by these Bylaws. In the event a matter is submitted to the Members for electronic voting or voting by any other method designated pursuant to Section 4.2 following a meeting of the Members, then regardless of whether a quorum was present at the meeting, the vote of a majority of the Members will be the act of the Members, unless a greater number is required by law, by the provisions of the Articles of Incorporation or by these Bylaws.

ARTICLE 5. BOARD OF DIRECTORS

Section 5.1 Definition of Board of Directors. The Board of Directors is that group of individuals vested with the management of the affairs of this Association subject to the law, the Articles of Incorporation, and these Bylaws.

Section 5.2 Qualifications of Directors. The qualifications for becoming and remaining a Director of this Association are that: (a) the Director has become the President, Vice President, Secretary or Treasurer of the Association by succession or by direct election by the membership, as provided for in these Bylaws, and is currently serving the Association in such capacity; or (b) the Director has been appointed as one of such officers by the Executive Committee to replace an officer who is no longer serving in such capacity; or (c) the director is the immediate Past President of the Association.

Section 5.3 Number of Directors. The Board of Directors shall be comprised of not fewer than four (4) nor more than five (5) Directors, consisting of the following individuals: the current President, Vice President, Secretary and Treasurer of the Association, and the immediate Past President of the Association.

Section 5.4 Election. The immediate Past President of the Association shall automatically become a Director when his or her successor has become President. The President, Vice President, Secretary and Treasurer shall become Directors when they have succeeded to or been elected or appointed to their respective offices, as provided for in these Bylaws.

Section 5.5 Term. The term of each Director shall be one (1) year, or until such Director’s successor shall be determined. A Director may serve for one or more terms.

Section 5.6 Removal. A Director may be removed at any time by the affirmative vote of at least three (3) of the Directors, whenever in their judgment the best interests of the Association will be served. Removal of a Director shall also terminate that Director’s tenure as an Officer of the Association.

Section 5.7 Resignation; Vacancies. Resignation of a Director will become effective immediately or on the date specified therein and a vacancy will be deemed to exist as of such effective date. Any vacancy occurring in the Board of Directors, whether by resignation, removal, incapacity, death or otherwise, shall be filled by majority vote of the remaining Directors. The new Director elected to fill the vacancy will serve for the unexpired term of the predecessor as both Director and officer unless otherwise provided by the Board of Directors.

Section 5.8 Place of Meetings of Directors. Meetings of the Board of Directors will be held at such place or places within or without Arizona as the Executive Committee, or in the absence of the determination of the Executive Committee, the President, determines from time to time.

Section 5.9 Regular Meetings of Directors. Regular meetings of the Board of Directors shall be held at such times and places as are specified by the Board of Directors or the President from time to time. Regular meetings may be held without notice of the date, time, place or purpose of the meeting.

Section 5.10 Annual Meetings of Directors. An annual meeting of the Board of Directors shall be held in November, or such other time as the President determines. Written notice stating the date, time and place of each annual meeting will be delivered to each Director not less than ten (10) days before the date of the meeting, either personally or by first class mail, by Federal Express, by Express Mail, by e-mail, by facsimile or by telegram, by or at the direction of the President or the Secretary. If mailed, such notice will be deemed to be delivered when deposited in the United States mail addressed to the Director at his address as it appears on the records of this Association, with postage prepaid. Such notice need not state the business to be transacted at, nor the purpose of, such meeting.

Section 5.11 Call of Special Meetings of Directors. A special meeting of the Board of Directors may be called by any one of the following: the President; the Executive Committee; or a majority of the Directors.

Section 5.12 Notice of Special Meetings of Directors. Written notice stating the date, time and place of any special meeting of the Board of Directors will be delivered to each Director not less than two (2) days before the date of the meeting, either personally or by first class mail, by Federal Express, by Express Mail, by e-mail, by facsimile or by telegram, by or at the direction of the President, or the Secretary, or the persons calling the meeting. If mailed, such notice will be deemed to be delivered when deposited in the United States mail addressed to the Director at his or her address as it appears on the records of this Association, with postage prepaid. Such notice need not state the business to be transacted at, nor the purpose of, such meeting unless otherwise required by the Articles of Incorporation or these Bylaws.

Section 5.13 Waiver of Notice of Meeting of Directors. Notice of the date, time, place, and purposes of any meeting of Directors may be waived in writing, either before or after the holding of such meeting, by any Director, which writing shall be filed with or entered upon the records of the meeting. The attendance of any Director at any such meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by him of notice of such meeting.

Section 5.14 Quorum of Directors. A majority of the Board of Directors then serving shall constitute a quorum. The act of a majority of the Directors present at a meeting at which a quorum is present will be the act of the Board of Directors unless a greater number is required by law, by the provisions of the Articles of Incorporation or by these Bylaws.

Section 5.15 Directors’ Meetings by Communications Equipment. Meetings of the Directors may be held through conference call, or any means of communications by which all Directors participating simultaneously hear each other during the meeting. A Director participating in a meeting by this means is deemed to be present in person at the meeting. Voting of Directors at such meetings may be conducted by voice vote, electronic voting, or facsimile.

Section 5.16 Action by Directors Without a Meeting. Action required or permitted to be taken at a Board of Directors meeting may be taken without a meeting if the action is taken by all of the Directors. The action must be evidenced by one or more written consents describing the action taken and signed by each Director. Any such written consent shall be filed with or entered upon the records of the Association. A consent signed under this section has the effect of a meeting vote and may be described as such in any document. Action taken under this section is effective when the last Director signs the consent, unless the consent specifies a different effective date.

Section 5.17 Ratification. Any Director not present at a meeting may ratify the validity and actions that took place in such meeting by signing a written document so indicating ratification. Such ratification shall be deemed to be an affirmative vote for every action taken in the meeting, unless otherwise specified in the writing. Such ratification shall also be deemed to constitute personal presence at such meeting.

Section 5.18 Compensation. No compensation shall be paid by the Association to the Directors for their services as Directors of the Association. No Director shall be prevented from receiving compensation for other services to the Association by reason of the fact that he or she is a Director of the Association.

Section 5.19 Consultation with Membership. The Directors shall have the right to submit issues to the full membership of the Association from time to time, for guidance and advice from the Members, but except as otherwise expressly provided in these Bylaws, the Directors shall have the authority to make the final decisions on Association matters.

ARTICLE 6. OFFICERS

Section 6.1 Roster of Officers. The Officers of this Association will consist of the following: Past President; President; Vice President; Secretary; Treasurer. In addition, the Board of Directors may elect such additional Assistant Officers as they from time to time elect by resolution.

Section 6.2 Election and Succession of Officers. The Past President of the Association shall be the immediate past President. The President shall be the immediate past Vice President. The Vice President, Secretary and Treasurer will be elected annually by the membership of the Association from among those candidates nominated for such positions by the Executive Committee. Any candidate for Vice President must have been an active Member of the Association for a minimum of one (1) year prior to his or her nomination. Each Officer will remain in office until a successor, if any, to such office has succeeded or been elected or appointed. Such succession will occur on the date of the annual meeting of the membership of the Association.

Section 6.3 Surety Member Officeholders. The President, Vice President, and Past President shall be Surety Members. Other officers may, but are not required to be, Surety Members.

Section 6.4 President. The President will be the Chief Executive Officer of this Association and will, subject to the control of the Executive Committee and Board of Directors, supervise and control the affairs of the Association. The President will perform all duties incident to such office and such other duties as may be provided in these Bylaws or as may be prescribed from time to time by the Executive Committee or Board of Directors. The President, or in his or her absence the Vice-President, or in his or her absence the Secretary, or in his or her absence the Treasurer, shall preside at all meetings of the Directors and Executive Committee of the Association.

Section 6.5 Vice President. The Vice President will be the President-Elect, and will perform all duties and exercise all powers of the President when the President is unable to act. The Vice President will perform such other duties as may be prescribed from time to time by the Executive Committee or the Board of Directors.

Section 6.6 Secretary. The Secretary will keep minutes of all meetings of the Board of Directors and the Executive Committee, will be the custodian of the corporate records, will give all notices as are required by law or by these Bylaws, and, generally, will perform all duties incident to the office of Secretary and such other duties as may be required by law, by the Articles of Incorporation, or by these Bylaws, or which may be assigned from time to time by the Executive Committee or Board of Directors.

Section 6.7 Treasurer. The Treasurer will have charge and custody of all funds of this Association, will deposit the funds as required by the Board of Directors or Executive Committee, will keep and maintain adequate and correct accounts of the Association’s properties and business transactions, will render reports and accountings to the Directors and to the Executive Committee at least quarterly, will make an annual report to the Members at the annual meeting of the Association, and will perform in general all duties incident to the office of Treasurer and such other duties as may be required by law, by the Articles of Incorporation, or by these Bylaws, or which may be assigned from time to time by the Executive Committee or the Board of Directors. The Board of Directors may from time to time require review of the Treasurer’s financial records of the Association by an audit committee appointed by the Board.

Section 6.8 Past President. The Past President will serve on the Board of Directors and the Executive Committee, and will perform all duties as may be provided in these Bylaws or as may be prescribed from time to time by the Executive Committee or Board of Directors.

Section 6.9 Vacancies. Resignation of an Officer will become effective immediately or on the date specified therein and a vacancy will be deemed to exist as of such effective date. Upon the occurrence of any vacancy, whether by resignation, removal, incapacity, death or otherwise, the Executive Committee shall nominate one or more nominees for the vacant position, and shall submit the nominee(s) to the membership for election, with voting by electronic voting or other method designated in accordance with Section 4.2. The new Officer elected to fill the vacancy will serve as Officer and Director for the unexpired term of the predecessor in office.

Section 6.10 Removal of Officers. An Officer may be removed at any time by the affirmative vote of at least three (3) of the Directors, whenever in their judgment the best interests of the Association will be served. Removal of an Officer shall also terminate that Officer’s tenure as a Director of the Association. The removed Officer’s position shall be filled in accordance with Section 6.9.

Section 6.11 Compensation. No compensation shall be paid by the Association to the Officers for their services as Officers of the Association. No Officer shall be prevented from receiving compensation for other services rendered or products sold to the Association by reason of the fact that he or she is an Officer of the Association.

ARTICLE 7. EXECUTIVE COMMITTEE

Section 7.1 Existence. There shall be an Executive Committee of this Association.

Section 7.2 Members of Executive Committee. The Executive Committee shall consist of those Directors who are, from time to time, also Officers of the Association.

Section 7.3 Term of Office. A Director shall automatically become a member of the Executive Committee when he or she becomes an Officer of the Association. A Director shall automatically cease to be a member of the Executive Committee when he or she ceases to be an Officer of the Association, whether as a result of resignation, death, incapacity, removal or otherwise.

Section 7.4 Powers of Executive Committee. The Executive Committee shall have and may exercise all powers and authority of the Board of Directors. Without limiting the generality of the foregoing, the Executive Committee shall have the power to incur indebtedness, direct action to be taken by the Officers, and in all other respects exercise the powers of the Board of Directors at any and all times.

Section 7.5 Meetings of Executive Committee; Action by Executive Committee Without a Meeting. Sections 5.8 through 5.17 shall apply equally to actions by the Executive Committee and actions by the Board of Directors.

ARTICLE 8. OTHER COMMITTEES

Section 8.1 Appointment of Committees. The Board of Directors or the Executive Committee may designate and appoint one or more Committees and delegate to such Committees specific and prescribed authority. Committee chairs shall be appointed by the President of the Association. Members of each committee shall be selected by the President or committee chairperson. Each committee shall have at least two (2) or more members who serve at the pleasure of the Board of Directors. However, no such Committee will have the authority of the Board of Directors or Executive Committee in reference to effecting any of the following:

(a) Filling of vacancies in the Board of Directors or Executive Committee or other committees.

(b) Adoption, amendment or repeal of the Bylaws.

(c) Adoption, amendment or repeal of any resolution of the Board of Directors or Executive Committee.

(d) Action on matters committed by the Bylaws or resolution of the Board of Directors or Executive Committee to another Committee.

Section 8.2 Action by Committee Without a Meeting. Action required or permitted to be taken at a committee meeting may be taken without a meeting if the action is taken by all of the committee members. The action must be evidenced by one or more written consents describing the action taken and signed by each committee member. Any such written consent shall be filed with or entered upon the records of the Association. A consent signed under this section has the effect of a meeting vote and may be described as such in any document. Action taken under this section is effective when the last committee member signs the consent, unless the consent specifies a different effective date.

ARTICLE 9. OPERATIONS

Section 9.1 Fiscal Year. The fiscal year of this Association shall be chosen by the Board of Directors.

Section 9.2 Books and Records. This Association will keep correct and complete books and records of account, and will also keep minutes of the proceedings of its Board of Directors, Executive Committee, and other committees.

Section 9.3 Inspection of Books and Records. All books and records of this Association may be inspected by any Director, Officer, or Member, or his or her agent or attorney, for any proper purpose at any reasonable time.

ARTICLE 10. CORPORATE SEAL

Section 10.1 Corporate Seal. The Association shall not be required to have a corporate seal.

ARTICLE 11. AMENDMENTS

Section 11.1 Amendment of Bylaws. These Bylaws may be amended, altered or repealed only by the affirmative vote of at least three (3) Directors, which has been ratified by the affirmative vote of a majority of the Members.

ARTICLE 12. INDEMNIFICATION

Section 12.1 Indemnification Required. To the extent it has the power to do so under the Arizona Nonprofit Corporation Act, A.R.S. § 10-3301, et seq., the Association shall indemnify all of its present, future and former Directors, Officers, committee members, employees or agents, to the maximum extent authorized by law, against expenses incurred by them, including without limitation legal fees, and judgments and penalties rendered or levied against them or any of them in any legal action brought against any such persons for actions or omissions alleged to have been committed by any such person while acting within the scope of his or her employment as a Director, Officer, committee member, employee or agent of the Association, provided that the Board of Directors shall determine in good faith that such person did not act, fail to act, or refuse to act willfully or with gross negligence, or with fraudulent or criminal intent, in regard to the matter involved in the action, and provided further that no such indemnification shall be available with respect to liabilities under the Securities Act of 1933, and provided further that the Association shall have the right to refuse indemnification in any instance in which the person to whom indemnification would otherwise have been applicable shall have unreasonably refused to permit the Association, at its own expense and through counsel of its own choosing, to defend him or her in any such legal action. Whenever any such present or former Director, Officer, committee member, employee or agent shall report to the President of the Association that he or she has incurred or may incur any such expenses, the Board of Directors shall, at its next regular meeting or at a special meeting held within a reasonable time thereafter, determine in good faith whether such person acted, failed to act, or refused to act willfully, with gross negligence, or with fraudulent or criminal intent in regard to the matter involved in the action. If the Board of Directors determines in good faith that such person did not act, fail to act or refuse to act willfully or with gross negligence or with fraudulent or criminal intent in regard to the matter involved in the action, indemnification shall be mandatory and shall be automatically extended as specified herein, except as otherwise provided hereinbefore.

ARTICLE 13. INSURANCE

Section 13.1 Maintenance of Coverage. The Association shall at all times maintain policies of commercial general liability insurance and directors and officers liability insurance with limits of liability in appropriate amounts as determined by the Association’s licensed insurance broker. The Association may maintain other insurance coverages as determined by the Board.